“Doesn’t getting a card lower my credit score?”
Last month my sister was planning a rare international flight. I recommended she pick up a travel rewards credit card. The Chase Sapphire Preferred rewards 2 points per dollar spent on travel and gives a 40,000 point signing bonus if you spend $2,500 in the first 3 months. The cost of an international flight alone is about $1,500 so hitting a bit over $300 a month in 3 months is easily attainable. Minimally all the points could be applied directly to the statement to pay for her trip. Her reply was “Doesn’t getting a card lower my credit score?”
Theoretically, it could since inquiries do negatively impact your credit score. However, using a smaller portion of your available credit has the opposite impact on your score.
For the past few years I have only had a few credit cards in my wallet. My primary card was my Discover Card, which earns 5% cashback on revolving categories throughout the year. All other spending earns 1% cashback which is not really a bad deal. For gas, grocery and drugstore purchases I had an old credit card that rewards 5% in those categories. In February, I called Discover about my account and customer service did very little to resolve my issue. At that point I decided I would focus my spending on other cards. When researching online I found a plethora of very great credit cards and companies competing for my business with nice bonuses. I pulled a few credit reports and all of them put me in the low 700s range. I have never missed a payment and nearly all of my spending is put on a reward credit card.
Since then I have applied for 4 different credit cards and been accepted for all of them. Over the same time span my credit score has increased substantially. All credit scores I have checked now put my credit score at over 750 and the only thing I have done is get more credit cards (more available credit) and paid off the balances in full with each statement. In my personal experience, applying for credit cards actually helps to improve your credit as long as you are a responsible borrower. In no way is this meant to condone applying for credit cards wrecklessly, but if you are dilligent with your finances your credit should not suffer.